USA AND JAPAN BOND INCHED UPWARD, ELSEWHERE TREND IS NEGATIVE

The yield on the benchmark 10-year Treasury note inched up towards 1.5% on Monday, slightly rebounding from an over 6-week low of 1.45% hit on November 5th, as investors gear up for inflation data released this week, while weighing the passage of a $1 trillion infrastructure spending bill and the latest US employment report. The bill passed by the Lower House will see new funding into roads, bridges, rail networks and the modernization of city transit systems. Also, data showed the world's largest economy added 531 thousand jobs last month, easily beating market expectations, while the unemployment rate fell to a new pandemic low of 4.6% and wage growth remained solid. Last week, the US 10-year bond yield slid almost 10% after the US Federal Reserve announced an expected reduction in stimulus but signaled no hurry to hike interest rates while reiterating inflationary pressures are likely to be transitory.

The yield on UK 10-year government bonds held below 0.9% in the second week of November, the lowest in nearly seven weeks, in the aftermath of the Bank of England’s decision to leave monetary policy unchanged in the previous week, defying bets of a rate hike. Still, policymakers kept a hawkish tone, saying the central bank would probably have to raise interest rates from all-time low levels "over coming months" if the economy performed as expected.

The yield on the benchmark Japan 10-year JGB sank further towards 0.06%, the lowest in over four weeks, as investors digested the widely expected Federal Reserve’s tapering announcement. Earlier, Japanese 10-year bonds were already recovering from 7-month highs as jitters over massive economic stimulus eased following the ruling party’s comfortable victory in Lower House general elections. Voters chose to consolidate Prime Minister Fumio Kishida’s power, which eases pressure from the government to lure parliamentary support via extra spending.

The yield on Australian 10-year government bonds took a downturn to 1.8% in November, after a rally sent yields to their highest since March 2019, as the Reserve Bank of Australia pushed back against expectations of aggressive tightening at its latest monetary policy meeting. Governor Lowe said rate hikes may be appropriate in 2023, rejecting market expectations that a hike could come as soon as May 2022, adding that the Board was going to be patient on policy. At the same time, policymakers left the cash rate unchanged at 0.1% but scrapped the yield control on the April 2024 government bond.

The yield on the German 10-year bund fell to -0.2% at the start of November, the lowest since October 14th and easing further from an over 2-year high of -0.094% reached last week as investors have pulled forward their expectations of when the European Central Bank will start to raise interest rates. After failing to push back against hawkish market bets at her news conference last week, ECB President Christine Lagarde said on Wednesday it was "very unlikely" that an ECB rate hike would take place in 2022 as the outlook for inflation over the medium term remains subdued. Elsewhere, the Bank of England kept rates and quantitative easing unchanged, and the Federal Reserve announced the beginning of taper this month at a pace of $15 billion a month, in line with market expectations. Earlier, the Reserve Bank of Australia managed to calm down the hawks by rejecting market bets of rate hikes in May 2022 and pledging patience in its policy.

Brazil's 10-year government bond yield eased from recent highs to trade around 11.9% at the beginning of November tracking an overall optimism in the international markets after the Fed’s decision came as expected with the announcement of the beginning of tapering by $15 billion a month, while no clues on the timeline for rates hikes were given. Meantime, fiscal and political woes continued to weigh on investors sentiments as the Brazilian government still awaits the end of the vote on the PEC of Precatorios, a proposal that limits the payment of judicial debts and makes room in the Budget to accommodate the Auxílio Brasil, so that it is not necessary to breach the spending cap rule. Also, the latest Copom minutes showed Brazil's central bank considered an even larger interest rate increase before making a 150-basis-point hike last week. The 10-year government bond has already increased around 500 bps along the year.

The yield on the 10-year government bonds in India inched down to a 4-week low of 6.3% in early November, tracking the US treasury yield, but remaining close to high levels not seen since April 2020, amid persistent fears of soaring energy prices slowing industrial production and fresh COVID cases of new variant A.Y.4.2 capping the economic recovery. In its monetary policy meeting last month, the Reserve Bank of India suspended bond buying under its government securities acquisition programme.

The yield on the Canadian 10-year government bond fell below 1.7%, easing from an over 2-year high of 1.75% hit on November 1st, amid a global rally in bond markets following a series of dovish stances from major central banks. The most recent interest rate decision came from the Bank of England, who left its quantitative easing program and interest rates unchanged. Earlier this week, the ECB President said the central bank was not planning on raising interest rates in 2022, while US Fed Chairman Powell said there was ground to cover in terms of employment and the pandemic before thinking of raising interest rates. Elsewhere, Governor Lower of the Reserve Bank of Australia said the board was going to be patient on policy and rate hikes may be appropriate in 2023, rejecting market bets that a hike could come as soon as May 2022.

Italy's 10-year government bond yield hovered around 3-week lows of 0.9%, having suffered its biggest weekly drop since May 2020 in the previous week after a set of central bank decisions calmed markets over a faster policy normalization. The Bank of England surprised markets by keeping interest rates unchanged at record lows and the Federal Reserve signaled no rush in hiking fed funds saying the current surge in inflation is expected to be transitory. Elsewhere, the ECB President said the central bank was not planning on raising interest rates in 2022 as the outlook for inflation over the medium term remains subdued.

The Swiss 10-Year Bond Yield fell to under -0.12% at the beginning of November, easing from the near 3-year high at the end of October as the ECB and the Fed recently pushed back against hiking interest rates. Consequently, investors pulled expectation on interest rates hikes forward, as 10-year bond yields are seen dropping across Europe, while the Swiss National Bank has already emphasized that expansive monetary policy shall be maintained. Meanwhile, latest Swiss inflation data indicates that consumer prices remain at over 3-year highs, while consumer confidence also eased recently.